‘Reforming’ the National Energy Board – will Trudeau get it right?

Pipeline reviews by National Energy Board must have process that incorporates wider environmental concerns without bogging down technical review

When the Trudeau Liberals are through, Canadians won’t recognize the review process for energy infrastructure projects. “Modernizing” the National Energy Board has attracted much of the energy industry’s attention, but the federal government effort is much more comprehensive than that, including a review of national environmental assessments and updating the Fisheries and Navigation Protection legislation.

Trans Mountain Expansion pipeline route.

Low public confidence is cited by Ottawa as the impetus for the overhaul. Natural Resources Minister Jim Carr says modernization is “designed to restore public confidence in the process.” That may be so, but what brave new world will confront energy infrastructure proponents when the Liberals are finished?

The source of public discontent isn’t hard to identify: First Nation and eco-activist opponents of the Northern Gateway and Trans Mountain Expansion pipeline projects systematically undermined the NEB’s legitimacy, arguing that it was in the pocket of the energy industry.

A steady drumbeat of media criticism and protest stunts – e.g. late August storming of an NEB panel meeting in Montreal – combined with a distaste for Conservative Prime Minister Stephen Harper’s constant cheerleading for pipelines eroded public support for the national regulator.

A March EKOS Research poll commissioned by CBC showed that only 10% of Canadians gave the NEB high marks. On the campaign trail in 2015 Liberal leader Justin Trudeau promised change and change is now well underway.

“The goal is to ask all of the right questions, put everything on the table, and emerge with a set of processes that reflect the realities of 2016, that respect the importance of partnerships and meaningful consultations with indigenous communities that understand we have international and domestic obligations to limit greenhouse gas emissions,” said Carr in an interview.

“Our strategy is to create a process, and room for all Canadians who have an interest in major projects, to express themselves.”

Catherine McKenna, Canadian environment minister.

The process will be led by an expert panel working under the purview of Environment Minister Catherine McKenna. Panel chair Johanne Gélinas is the partner in charge of the sustainability and greenhouse gas management practice Raymond Chabot Grant Thornton, and other members include a retired bureaucrat and mining executive, and two lawyers.

The panel traversed the country consulting with Canadians from Sept. to mid-Dec. and submitted a report by March 31, a daunting deadline given the scope of the mandate. At the same time, ministers in charge of the NEB (Carr), Fisheries and Oceans (Dominic LeBlanc), and Transport (Marc Garneau) are “mandated to carry out reviews and propose reforms to matters that intersect with environmental assessment.”

The focus for the oil and gas industry, of course, is the NEB. Minister Carr’s reform mandate reads, “ [to] modernize the National Energy Board to ensure that its composition reflects regional views and has sufficient expertise in fields such as environmental science, community development and Indigenous traditional knowledge.”

This would appear to be a shift in focus for the NEB and Gaetan Caron – NEB chair from 2007 to 2014, among the most tumultuous years of the independent agency – is not happy about the new direction.

“If you looked at the last five years, all the criticism directed at the NEB process is not specific to any error the board made in its judgement or in its procedural choices,” Caron said in an interview.

“The fundamental criticism directed at the NEB is a direct criticism of the policy choices under the terms of Mr. Harper’s government approach to climate change.”

Gaetan Caron, former NEB chair.

From Caron’s point of view, pipelines have become a proxy for the fight over greenhouse gas emissions and international agreements like the Paris Accord, and that has put the NEB on the front lines of a battle it is not equipped to fight.

The NEB is guided by the National Energy Board Act, which reflects the constitutional division of powers between the Canadian and provincial governments, he says. The NEB cannot examine the impact of upstream emissions because that falls under provincial jurisdiction. And even though it is a federally created agency, the NEB cannot assume the authority of the Crown with respect to First Nations.

“These are matters that the Board found in the past to be outside of the relevant considerations it had to to look at in the pipeline examination,” he said.

There are really two world views in play – and in conflict – here.

The more narrow, technical and traditional view of the energy regulator represented by Caron, Harper and the Conservatives, and industry itself.

Then there is the “globalist approach to climate change,” as Caron calls it, represented by Trudeau and the Liberals.

The key question for industry, as the Alberta oil sands prepares to add another one million barrels of production a day by 2025 and worries about getting product to market, is where the Trudeau government lies on the continuum between the climate change zeal of eco-activists and the economic realities of pipeline operators and producers. Recent pipeline decisions by Ottawa offer a clue.

In late November, the Prime Minister announced a green light for Kinder Morgan’s Trans Mountain Expansion (from Edmonton to Burnaby) and the replacement of Enbridge’s Line 3 (Hardisty to Manitoba’s border with Minnesota).

He noted both pipelines were in the national interest and “that major pipelines could only get built if we had a price on carbon, and strong environmental protections in place. We said that Indigenous peoples must be respected, and be a part of the process.We also said that we would only approve projects that could be built and run safely.”

Industry can reasonably assume future pipeline reviews will be based upon the world view reflected in Trudeau’s speech. That means completing the process laid out for the expert panel and the departments, then drafting new legislation for Parliament, and eventually re-organizing the bureaucracy and the regulator.

How all the pieces will fit and how the new process will work won’t be clear for another year – or perhaps two, if the changes are sufficiently controversial. But the general principles are fairly clear: a bigger role for indigenous peoples, a more open and consultative process, attention to upstream emissions, and greater attention to climate mitigation strategies.

But if the Trudeau government can build a workable process that is predictable and not too onerous, there is a chance industry may have a way out of the morass of the past decade.